Philips sells its Singapore headquarters to Ascendas REIT

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The Philips APAC Center is the Dutch company’s latest industrial asset in Singapore

Philips has agreed to sell its Asia-Pacific headquarters in Singapore’s Toa Payoh region to Ascendas REIT for S$104.8 million ($76.2 million), as the Amsterdam-based conglomerate continues to restructure its global operations.

After selling off its home appliance and lighting divisions in recent years to focus on health tech, the Amsterdam-based company no longer occupies the entire 408,760-square-foot (37,975-meter) building. squares) and will lease approximately two-thirds of the structure of the REIT managed by CapitaLand after completion of the transaction.

“This does not change our business operations and Singapore will remain an important market for Philips and a thriving regional hub for our business, innovation and stakeholder collaboration,” said Caroline Clarke, Managing Director and Vice President. Executive of Philips ASEAN Pacific. commenting on the sale, which is believed to have been ongoing since last December.

The sale which was announced in an SGX filing last week makes Philips the latest multinational to raise capital for its core businesses through a sale-leaseback agreement involving Singapore facilities, following the agreement of the Japanese company Pokka Sapporo Food & Beverage in April with the logistics specialist ESR. and US fund manager PGIM Real Estate for a logistics project on Benoi Crescent.

96% busy

For SGX-listed Ascendas REIT, Philips’ wasteful space represents an opportunity to expand its portfolio in the trust’s home city.

William Tay, CEO of Ascendas REIT

William Tay, CEO of Ascendas REIT

“Singapore remains a key market for Ascendas REIT, accounting for approximately 60% of total assets under management,” said William Tay, executive director and managing director of the trust manager. “The acquisition of APAC Center is a natural addition to the portfolio, strengthening our technology and biomedical customer base and improving the overall resilience of the portfolio.”

The purchase price, which equates to S$256.39 per square foot of existing floor area based on independent calculations, results in a 6% discount on the property’s independent market value of 111.5 million Singapore dollars. If the acquisition costs of S$1.05 million for the trust manager and other transaction costs are taken into account, the total cost of the sale is S$110.4 million.

The Philips APAC center has six levels comprising laboratories, research, warehouses and ancillary offices, and is currently 95.7% occupied by four companies, with Philips as the anchor tenant. Together, the tenants have a weighted average term to lease expiration of 4.5 years.

The CapitaLand Investment-sponsored trust estimates that in the first year following the transaction, the asset will generate a return of 6.8% based on net property income and increase distributions per unit by S$0.045.

The A-REIT director said he also plans to obtain a BCA Green Mark Gold Plus certification for the asset under Singapore’s Green Building Scheme. The deal, which was negotiated by CBRE, is expected to be finalized by the second half of the year and will be financed by a combination of internal resources and debt. It will bring the REIT’s portfolio to 229 properties, comprising 96 assets in Singapore and 36 Australian properties, as well as 97 assets in the US and UK.

CBRE declined to comment on the transaction.

Consumer Electronics Release

Located at 622 Lorong 1 Toa Payoh in the northern part of central Singapore, the facility near Caldecott MRT was redeveloped in 2016 for use as a high-tech headquarters and innovation hub. Located less than a 15-minute drive from Singapore’s central business district, the project site still has around 20 years left on its 99-year lease.

Philip’s Clarke described the sale of Toa Payoh as a logical move given that the asset is already occupied by several tenants after Philips divested its Signify lighting division in a deal which was completed in 2020 and sold its appliance unit last year. Hillhouse Capital acquired the appliance business for 3.7 billion euros (now $3.78 billion).

Philips first established its operations in Singapore in 1951 as some of the company’s largest manufacturing facilities in the world, before transforming them into research and development centers as it moved into the health technology sector. .

Rising rents support industrial transactions

The transaction comes as Singapore’s industrial sector continues to attract strong demand from occupiers and investors, thanks to a “vibrant manufacturing sector” and strong economic fundamentals, said Dylan Chua, senior director of industrial and logistics services. at CBRE.

“In particular, we are seeing strong activity from the electronics/semiconductor, biomedical and precision engineering clusters,” Chua said in response to questions from Mingtiandi on Friday. “From an investment perspective, Singapore’s industrial market continues to attract incredible interest, driven by strong fundamentals in the manufacturing and logistics sectors, which are creating strong rental growth.”

Singapore’s industrial rents rose 1.5% in the second quarter from the previous three months, according to JTC data.

The latest figure represents the seventh consecutive quarter of growth for the sector, supported by a vacancy rate which fell to 9.1% last quarter.

Rising rents and falling vacancy rates have spurred sales of industrial assets in the city, including ESR-Logos REIT which cashed in on its five-story Pandan logistics center in Jurong East last month via a sale of 43 .5 million Singapore dollars to the local company ST Logistics.

The SGX-listed trust exits what it calls a non-core asset at a 15% premium to its valuation.

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